In this month's Viewpoint: Forecast update: recovery trimmed, but on track, Europe: mixed macro and mixed election results, EM forecast update: crumbling BRICs, and Views at a glance.
31 May 2014
- Global recovery continues, but our growth forecast has been shaved as a result of downgrades to both the advanced and emerging economies. The latter face the more significant challenge in adjusting to the post financial crisis world, whilst the former should bounce back with the US in the second quarter. Divergent monetary policy remains a key theme with the Fed and Bank of England expected to raise rates in 2015 while the ECB, BoJ and PBoC are likely to remain on an easing tack.
- The risks to our forecasts are still tilted toward weaker growth and inflation led by a China hard landing, the threat of Eurozone deflation and secular stagnation. However, stagflationary risks have risen as a result of introducing a new scenario, capacity constraints bite, whilst political event risk is present should the Russia-Ukraine crisis deteriorate or a trade war erupt in Asia.
- The European growth figures for the first quarter were very mixed. Some countries such as Germany and Spain are gaining momentum in their recoveries, while others such as Italy and France are failing to impress and are struggling to implement structural and fiscal reforms.
- The European parliamentary election results were also mixed, with euro-sceptic parties making clear gains, but not in all countries. The most worrying results came from France and the UK, where large gains were made by populists, and where they are most likely to influence future results. The wider impact will be to slow EU expansion, which raises the risk of greater Russian influence in the region in the long-term.
EM forecast update: crumbling BRICs (page 13)
- The situation has stagnated or deteriorated for the BRIC countries, with macro disappointments in China, and political concerns in Brazil and Russia. India alone has hinted at a brighter future, but upgrades will have to wait until promises become actions.
Views at a glance (page 19)
- A short summary of our main macro views and where we see the risks to the world economy.
Important Information: The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.